Applovin(APP)2024-11-07 00:34Financial Data and Key Metrics - Total revenue reached 722 million, achieving a 60% adjusted EBITDA margin [14] - Free cash flow grew to 835 million, growing 66% YoY, with adjusted EBITDA of 363 million, a 1% increase YoY, with adjusted EBITDA of 437 million, and received Board approval to increase its share repurchase authorization by 1.24 billion and 740 million and $760 million, targeting a 60% adjusted EBITDA margin [21] Q&A Session Summary Question: E-commerce pilot revenue contribution and gaming vs. non-gaming performance [23] - E-commerce is still in pilot and has not yet made a material financial impact, with the step-up in performance this quarter driven entirely by the gaming side [24][25] - The company expects e-commerce to become financially impactful in 2025 and beyond [27] Question: Google Cloud capacity expansion and timing [23] - The renewal of the Google Cloud contract was slightly earlier than planned to support future growth, with the company investing in infrastructure ahead of current consumption needs [28][29] Question: E-commerce ramp and potential challenges [30] - E-commerce is a new category for AppLovin, and while brand awareness is needed, the company is taking a long-term approach, similar to its strategy in gaming [31] - Early data from the e-commerce pilot has been strong, with advertisers seeing significant returns, which could accelerate adoption [32] Question: Expansion beyond e-commerce using AXON technology [34] - The company believes its technology can eventually serve any transactional business, including e-commerce, gaming, and other verticals, with no limitations on the power of its algorithms [35] Question: Capital allocation and M&A strategy [36] - The company has no plans for M&A in the advertising business and remains focused on organic growth, while continuing to buy back shares despite the stock's strong performance [37][38] Question: E-commerce solution timing and go-to-market partners [40] - The e-commerce solution is on track for general availability next year, with early success from pilot advertisers generating significant social media buzz [41][42] Question: DSP ecosystem and arbitrage model [43] - AppLovin's business model focuses on delivering automated advertising to a revenue goal, taking on the risk of media spend, which differentiates it from percentage-of-spend models like Trade Desk [44] Question: E-commerce material contribution timeline [47] - The company expects e-commerce to start making a material contribution in 2025, though the exact timing and scale of the ramp remain uncertain [48][49] Question: AXON licensing and Flip app partnership [50] - AXON licensing remains a longer-term focus, with current resources prioritized for scaling the e-commerce opportunity [51] Question: 2025 growth outlook [53] - The company does not provide long-term annual guidance but expects growth to exceed 20% to 30% if it continues to deliver model enhancements, with e-commerce being an additive opportunity [54][55] Question: GenAI in advertising [56] - Generative AI is on the company's roadmap, with potential for personalized ad creatives to significantly improve response rates, though the timeline and impact remain uncertain [57] Question: Supply expansion beyond mobile games [60] - The company is exploring supply expansion, including CTV through its Wurl acquisition, with plans to tap into additional ad supply categories over the next five years [61] Question: Market share gains in mobile gaming [63] - AppLovin's growth in mobile gaming is driven by unlocking more user acquisition spend rather than market share gains, as the company has already captured a significant portion of the market [64][65] Question: AXON 2's application in e-commerce [67] - The e-commerce opportunity leverages AXON 2's technology with minor tweaks, allowing the company to enter a greenfield market with no direct competition in mobile gaming for non-gaming categories [68][69] Question: Customer response to AXON 2.0 improvements [71] - All advertisers on the platform have the capacity to increase spending in response to AXON 2.0 improvements, with the system being fully automated [71] Question: E-commerce investment and bottlenecks [72] - The company is heavily investing in e-commerce, with no significant bottlenecks other than the need for more human capital and automation to scale the platform [72] Question: Technical step function changes [73] - The frequent technical unlocks are driven by the company's exceptional engineering and research team, which continuously incorporates new research and advancements into the platform [73] Question: Probabilistic billing impact [74] - The switch to probabilistic billing on iOS had a nominal impact on the business, aligning more accurately with advertiser tracking [74]